Patience
My wife and I once owned a beautiful wooden sailboat—built in 1929, that famous economic peak—that we named Patience.
Patience is a valuable attribute for sailors who are waiting for the wind to change. And patience is a key attribute for long-term investors. Investors who are impatient are the ones who sell at the bottom and then sit on the sidelines as stocks move back up.
So patience is what I continue to counsel for readers with losses in the stocks in our portfolio.
In my issue from two weeks ago I spelled out the valuation case for cannabis stocks. The biggest point: cannabis stocks, which have excellent growth prospects as legalization trends continue, are now nearly as cheap as tobacco stocks, which have terrible growth prospects.
Now, obviously, most cannabis stocks are not moving up yet, but the stage is clearly set. In addition to the valuation case, the news is absolutely horrible, with inflation taking center stage but war in Ukraine a close second and guns and violence and Covid following behind. Pessimism is rampant. And it’s exactly these conditions that make me very optimistic about the future for our stocks.
In addition, the positive market action over the past three weeks means Cabot’s intermediate-term market timing indicator is on the verge of giving a buy signal for the general market!
Going into today, our cannabis portfolio is down 34.5% for the year, while the Global Cannabis Stock Index is down 43.6% and the Global Cannabis X ETF (POTX) is down 42.1%. It’s been a rough year! But I’m very optimistic that there’s an uptrend ahead (possibly soon) and that we can erase those losses by continuing to follow our system of holding cannabis stocks that have size, speed and chart strength on their side.
Today the portfolio is 51% in cash, with our three biggest holdings being Cresco Labs (CRLBF), Curaleaf (CURLF) and Green Thumb Industries (GTBIF).
Curaleaf clearly has the strongest chart, trending up for nearly five weeks. Innovative Industrial Properties (IIPR) has the second-best chart, also up for five weeks though not as steadily. And TerrAscend (TRSSF) and Trulieve (TCNNF) have strong bases, telling us the selling pressures in these stocks are being balanced by buying pressures.
I’m making no changes to the portfolio today, but if this nascent market uptrend continues, I’ll soon be using our cash to add to the strongest stocks. Until then—patience!